Residential Market Update

Since Spring of last year, we have seen a significant uptick in inquiries for new builds. This trend has continued through Q1 2024, with the WA housing market showing a 3.4% increase YoY. In addition to increased demand for new build homes, construction costs are down across the board. Most major commodities are returning to stable pricing after a few years of volatility.

Locally, the buyer profile we're seeing right now is mostly ‘all cash’, due to high interest rates pricing leveraged buyers out of the market. The pace of construction starts has continued the downward trend we saw last year. As of March 2024, residential construction housing starts were at a seasonally adjusted annual rate of 1,321,000. This is a 14.7% decrease MoM and 4.3% decrease YoY.

Most major commodities have returned to historically normalized pricing, and labor costs remain stable. Price elasticity in construction is limited due to the market environment of cost inputs. Materials are commodities traded in a hyper-competitive open and competitive marketplace, and they have a cost floor in most market conditions. Lumber, for example, will never cost less than what it actually costs to harvest and mill the timber, unless there’s an unusual environment of material surplus concurrent with low market demand.

Labor is also traded in a very competitive environment, and it has the nature of a cost floor due to the availability of unemployment benefits. In periods of economic recession, tradespeople can rely on unemployment income, so there is limited incentive to change the amount they are willing to accept to work. Because of these conditions, even in times of economic pullback, construction costs remain relatively stable.

producer price index

In March 2024, the Federal Reserve Bank of St. Louis indicates a 0.38% rise in the PPI for net inputs to residential construction goods. With a YoY increase of 1.87%, this is a bit higher than index pricing for the same time last year.

Lumber -3.46% YoY

The cost of lumber is at its lowest since 2020. However, expected wildfires could reverse this trend - this is something to keep an eye on.

Concrete +6.17% YoY

Prices for concrete are peaking with no signs of going down. This is primarily due to a high demand and limited supply.

Steel -5.8 % YoY

The cost of steel has continued to stabilize, currently sitting just below the 3-year highs we’ve seen.

Glazing +0.9% YoY

Glass has remained fairly stable in pricing, with no significant change since last year.

Local Labor Costs - Chelan, WA

We are seeing an increase in labor costs in Chelan, with the average residential labor rate going up 8.28% YoY. This is in contrast to the decrease we saw last Spring. Despite this, our team continues to receive calls almost daily from tradespeople looking for work. In a select marketplace like Chelan, these are typically smaller local teams, so the local labor market experiences higher pricing elasticity than less volatile and union-influenced areas such as Seattle. In other words, Chelan-based trade partners are often more willing to lower their prices to fill their backlogs.